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Friday, July 31, 2015

The county charter/community bill of rights for Athens County appears headed toward the Nov. 3 ballot, but it’s important for residents to be aware of its limitations and potential consequences.

This isn’t intended to recommend how residents vote on the proposed county charge (not yet), but rather that when they vote yes or no, they do so with eyes wide open.

Or another way of putting it, the question isn’t whether stopping oil and gas injection wells and regulating fracking are worthy endeavors (I think they are), but rather whether city and county community bill of rights amendments will accomplish that goal. Evidence strongly suggests they won’t.

Even if the Athens County charter/community bill of rights wins in a landslide, it likely will have no effect on oil-and-gas drilling activities (including injection wells) in Athens County. If you’re voting for this measure to protect county water resources and the environment in general, you’re probably going to be disappointed with the results.

Courts in Ohio and elsewhere across the country have ruled against similar community bill of rights and charters purportedly designed to ban or restrict fracking and other oil and gas drilling activities. Nearly all of these laws were either written by, or based on measures written by, an insurgent outfit in Pennsylvania, the Community Environmental Legal Defense Fund (CELDF).

We mentioned yesterday on the blog a new study from Stanford professor Rob Jackson. It is the latest study to find no actual water contamination from fracking, although Jackson's focus in the study's conclusion was on the potential for such contamination to occur.

Energy in Depth, an industry-backed site, has posted an article about this study. Below you can read it in its entirety.

New Stanford Study Confirms No Contamination from Fracking, “Shallow” or Not

by Dave Quast, Energy in Depth

Researchers led by Rob Jackson of Stanford University recently released a study in the journalEnvironmental Science and Technology that suggests that shallower wells could pose more risk to groundwater than deeper ones. (You may recall Dr. Jackson from previous fracking-related work he did while at Duke University.)

“Using innovative techniques such as isotopic “tracer” compounds that distinguish the source of chemicals in well water, Jackson has not found evidence that frack water contaminants seep upward to drinking-water aquifers from deep underground.”

The researchers simply claim there are potential risks from shallower wells, but they do not provide convincing evidence that these risks are plausible. Further, existing evidence from other studies, and from 65 years of practical experience, do not support such a conclusion.

Fact #1: Landmark studies find no contamination from shallower wells

The researchers claim,

“Using 44000 observations of hydraulic fracturing depths reported to FracFocus between 2008 and 2013, we address three questions: (1) What are the range of depths and water use for hydraulic fracturing across the United States?; (2) In which states and at what locations has the shallowest high-volume hydraulic fracturing occurred?; (3) What policy protections are or might be put in place to minimize the risk of direct contamination of drinking water from hydraulic fracturing?” (Stanford Study, Page B)

The study, then, assumed a greater risk of water contamination based on well depth. However, the most recent existing peer-reviewed study involving fracking and water quality is one the Stanford authors cite – a peer-reviewed report by the independent California Council on Science and Technology (CCST), which was released in the last few weeks. The study notes among other things that approximately half of the hydraulically fractured wells in California were found at depths less than 2,000 feet from the surface.

The CCST study then clearly states that evenshallow wells have not been contaminated:

Another landmark national study drew the same conclusion earlier this month. The U.S.Environmental Protection Agency (EPA) conducted its own comprehensive, five year study on wells around the country, including the shallowest hydraulic fractured wells: those involving coal-bed methane (CBM).

The EPA concluded:

“From our assessment, we conclude there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources…We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.” (ES-6) [Emphasis added]

Well depths of the investigated areas were as shallow as 350 feet, and seven of the major coal basins had depths lower than 1,000 feet.

“Based on the information collected and reviewed, EPA has concluded that the injection of hydraulic fracturing fluids into [CBM] wells poses little or no threat to USDWs [underground sources of drinking water] and does not justify additional study at this time.” (Section 7.4)

Whether in extra-shallow CBM wells or much-deeper shale wells, we would know about anyproven links between fracking and water contamination if they existed, not least because anti-industry activists would trumpet them from the proverbial (or perhaps literal) rooftops. As it happens, when asked at a U.S. Senate hearing by Sen. Mary Landrieu (D-LA) to name a specific instance of fracking contaminating groundwater, representatives of the Sierra Club and the Natural Resources Defense Council were unable to do so.

Fact #2: Hydraulic fracturing accounts for a fraction of one percent of total water use

The study found that while there is little evidence of widespread negative health and environmental effects directly related to fracking, there are huge gaps in record-keeping and data necessary to understand whether the practice is causing small earthquakes, contaminating future drinking water supplies and injuring nearby residents.

Oil producers, it says, should not be allowed unlimited use of hazardous chemicals because there are hundreds of harmful substances being injected underground without study.

What’s more, the federal government is allowing oil producers to discharge fracking and other well-stimulation discharge into the ocean and isn’t keeping accurate records on those discharges. The first federal study on well-stimulation methods, released last month, found that the practices are largely safe but that there is insufficient data to truly know whether damage to the environment and human health is taking place.

“We should be looking for the direct impacts and preventing them with precautionary measures,” Long said. “All chemicals should be revealed. We should know the toxicity and environmental profiles for all of them and work corroboratively with the industry on how to reduce them.”

As hotels continue to pop up all over the Belmont County hillsides, another readies to open in a matter of hours.

It’s led Cafaro Company spokesman Joe Bell to suggest now, more than ever, is a boom time for the hotel industry in the county, as the drilling industry continues to spike a staggering demand for local housing.

"They’re finding now that when they open these hotels, within a few weeks, they're topping out at 90 percent occupancy," Bell said.

On the perimeter of the Ohio Valley Mall, part of that demand is still a work in progress.

Thursday, July 30, 2015

Stanford scientist's investigations show that drinking water sources may be threatened by thousands of shallow oil and gas wells mined with the controversial process of hydraulic fracturing. A new study suggests safeguards.

The United States now produces about as much crude oil as Saudi Arabia does, and enough natural gas to export in large quantities. That's thanks to hydraulic fracturing, a mining practice that involves a rock-cracking pressurized mix of water, sand and chemicals.

Ongoing research by Stanford environmental scientist Rob Jackson attempts to minimize the risks of "fracking" to underground drinking water sources.

The most recent such study, published in Environmental Science & Technology, finds that at least 6,900 oil and gas wells in the U.S. were fracked less than a mile (5,280 feet) from the surface, and at least 2,600 wells were fracked at depths shallower than 3,000 feet, some as shallow as 100 feet. This occurs despite many reports that describe fracking as safe for drinking water only if it occurs at least thousands of feet to a mile underground, according to Jackson.

The authors also estimated water use for hydraulic fracturing in each state. The states with the highest average water use per well were Arkansas, Louisiana, West Virginia and Pennsylvania.

Perhaps most surprisingly, the researchers discovered that at least 2,350 wells less than one mile deep had been fracked using more than 1 million gallons of water each. Shallower high-volume hydraulic fracturing poses a greater potential threat to underground water sources because there is so little separation between the chemicals pumped underground and the drinking water above them.

"Shallow hydraulic fracturing is surprisingly common," said Jackson, the Michelle and Kevin Douglas Provostial Professor in the School of Earth, Energy & Environmental Sciences and a senior fellow at the Stanford Woods Institute for the Environment and the Precourt Institute for Energy. "The places where hydraulic fracturing is both shallow and water-intensive may need additional safeguards."

For example, Arkansas had more than 300 wells fracked shallower than 3,000 feet, using an average of 5 million gallons of water and chemicals. Other states that fracked wells shallower than 3,000 feet using more than a million gallons each included New Mexico (16), Texas (10), Pennsylvania (seven) and California (two).

In Ohio’s Utica shale, getting the natural gas out of the rock is the easy part.

Getting it out of the state, however, where it can fetch a decent price, is another matter entirely.

“The problem we have in this entire play is we’re still behind on midstream infrastructure and we need pipelines to get the gas out of the region,” said Ned Hill, an economist and former dean at Cleveland State University, now with Ohio State University, who has been studying Ohio’s shale boom.

Midstream means pipelines and processing plants for the most part. It’s the part of the oil and gas industry that either gets natural gas to end markets like Canada or the East Coast — where it sells for a fair bit more than it does in gas-drenched Ohio — or the part that separates out natural gas liquids like propane, butane and ethane and processes them.

In other words, it’s the highway to lucrative markets for the Utica shale’s two chief commodities — methane and ethane — and so far there are not enough lanes open.

But before we get into the important topics, let's first start with some recent dry Utica results that we're very excited about. This past Friday, we began flow back on the Gaut 4IH, a deep dry Utica well located in Westmoreland County, Pennsylvania. The Gaut stands out over and above any other Utica wells built to-date because of its location and results. This is a true step out well which adds substantial breadth to the entire Utica play. Based on flow rate, the Gaut is the second best dry Utica well to drill to-date with maximum flowing pressures exceeding 9000 pounds and a 24 hour flow rate in excess of 61 million cubic feet a day. During the 24 hour flow test, the pressures never dropped below 7500 pounds. The Gaut has a 5840 foot lateral that was drilled and completed for approximately $27 million. And as we've seen with our Monroe County Utica wells, there will be tremendous improvement in costs as we move forward with additional wells. But most importantly, the Gaut proves up a significant amount of dry Utica acreage and adds 15 plus years to our already impressive inventory of drillable stacked play wells. Dry Utica wells of this caliber will generate a rate of return in excess of 35% at $2.95 per Mcf realized price and will be accretive to CONSOL's growing NAV. The recent buzz over Utica well results plays perfectly into CONSOL's portfolio, which consists of a dominant acreage position in the four areas of the wet and dry Utica in Ohio, Pennsylvania and West Virginia.

EQT's record setting well in Green County is less than four miles from CNX's GH9 well that is currently being drilled on a 100% CONSOL fee acreage. This outstanding EQT well is bracketed by CONSOL controlled acreage. Our Green Hill field is a few miles to the south, the Nineveh field is due north and the Majorsville field is due west. Not only does CONSOL own a significant footprint across Green and southern Washington counties, but almost half of this is fee acreage, which is a huge boost to rate of return.

Production volumes reached a record high, averaging 1,373 Mmcfe per day, a 24% increase over the prior-year quarter.

Unit costs declined $0.36 per mcfe, or 11% compared to the prior-year quarter.

Two Marcellus dry gas wells in southwest Pennsylvania were turned in line, each at 34.2 Mmcf per day, 1.8 Bcf per well of cumulative production in 90 days.

Full-year 2015 capital budget of $870 million is on track to deliver 20% annual growth.

Spectra's Uniontown to Gas City project is anticipated to open ahead of schedule allowing Range as anchor shipper to move approximately 170 Mmcf per day of net natural gas production, or approximately 28% of its average net second quarter production in the southwest Marcellus, to Midwest markets with improved realized prices.

Mariner East I expected to start the commissioning process in late third quarter expanding Range's access to NGL markets outside the Appalachian basin with Range being the only producer directly holding capacity on the project.

Commenting, Jeff Ventura, Range's Chairman, President and CEO, said, "Operational results in the second quarter continued to be excellent, as we lowered costs, improved capital efficiencies, exceeded production guidance and achieved great drilling results, especially in the dry gas area. Conversely, the oversupply of natural gas and NGLs in Appalachia challenged commodity prices during the quarter. Importantly, Range expects relief later this year as two key marketing events are projected to commence -- Mariner East I which is expected to improve our NGL pricing in the fourth quarter and Spectra's Uniontown to Gas City project which is expected to improve our natural gas pricing is anticipated to commence ahead of schedule on August 1st. The Spectra project is expected to be impactful since that capacity would equate to about 28% of our second quarter average net production in our Southern Marcellus Division when it comes on line, while Mariner East I is expected to cover almost all of our propane production and add a major ethane market to our already industry-leading ethane sales portfolio. Both projects are expected to provide substantial pricing improvements for Range.

"Range is on track to spend $870 million in 2015, approximately $700 million less than 2014, while still generating 20% year-over-year production growth. We believe this makes Range one of the most capital efficient producers in the industry. This capital efficient growth combined with our dry, wet and super-rich drilling inventory across the Marcellus, Utica and Upper Devonian give us great optionality to maximize returns throughout any commodity cycle. We believe this inventory, coupled with our capital discipline and diversified portfolio of marketing arrangements, allows Range to create value as we move forward into an expected better market that balances supply, demand and infrastructure."

Capital Expenditures

Second quarter drilling expenditures of $262 million funded the drilling and recompletion of 68 (66 net) wells with a 100% drilling success rate. In addition, during the second quarter, $23 million was expended on acreage, $2 million on gas gathering systems and $4 million for exploration expense. Range is on target with its $870 million capital budget for 2015. Similar to recent years, the 2015 capital budget is front-end loaded and has been redirected to more dry gas drilling to maximize expected rates of return. The Company started the year running 15 rigs and is now down to 10 and expects to finish the year with six rigs. The number of wells expected to be turned in line in 2015 has been increased by 19, as operational improvements have allowed for some planned early 2016 wells to be turned in line in late 2015. Range expects sequential production growth throughout 2015 and a strong inventory of wells waiting on completion at the end of the year. Those wells are expected to be brought on line early in 2016 when regional pricing is anticipated to be seasonally stronger along with improved transportation.

Dingmann said that he "would not be surprised" to see Chesapeake to initiate another round of asset sales at one or two of its seven primary operating regions. The company could generate over $500 million in proceeds, which could be used to "take activity higher" than the company's year-end 2014 forecast of the nine to 19 rigs.

Dingmann also noted that Chesapeake is "one of the most asset rich companies" among his coverage with a net asset value "well north" of his $15 price target. The company's large position could enable it to "carve off" non-core sales as it did last year when it sold the Southern Marcellus/Eastern Utica acres for $4.975 billion.

The analyst also discussed Chesapeake's operating efficiencies and pointed out improvements at its operations at Utica and Eagle Ford. At Utica, the company "improved massively" its efficiencies with its spud/rig release around 13 this year versus 19 in 2013, lateral lengths up to 7,900 feet this year versus 5,150 feet in 2013 along with cost per lateral foot down nearly 30 percent from 2013.

Renewable energy backers are hoping their voices will be heard when the debate over Ohio’s future energy policy heats up.

That will likely begin next week, when the U.S. Environmental Protection Agency releases its Clean Power Plan, which will tell Ohio how much it needs to cut its carbon dioxide emissions.

That will be followed in August or early September by two reports done in-state. One is coming from the Ohio Legislature’s Energy Mandate Study Committee that is considering whether the state should resume, abandon or alter its energy efficiency and renewable energy standards, after freezing them in 2014.

Another will come from Ohio’s Energy Future, a group of clean-energy advocates that has been touring the state in recent months, working to get citizens and policymakers to advocate for state support of wind, solar and other forms of renewable power.

While OEF is concerned about the environment, its arguments are more economic. It contends that Ohio and its businesses are already missing out on economic opportunities because the state has been inconsistent and often less than supportive of renewable energy. In Cleveland, the group’s backers include manufacturers and their advocates.

Wednesday, July 29, 2015

In a decision that is likely driven by a desire to share the good production news ahead of the more disappointing financial figures, both Gulfport Energy and Eclipse Resources have chosen to issue press releases with operating results from the second quarter with a scheduled date included of when financial results will be coming.

First, from Gulfport:

Gulfport produced oil and natural gas sales volumes of 473.9 MMcfe per day during second quarter of 2015, representing a 12% increase over first quarter 2015 production of 424.4 MMcfe per day and a 196% increase over second quarter of 2014 production of 160.3 MMcfe per day. For the second quarter of 2015, Gulfport's production mix was approximately 77% natural gas, 13% natural gas liquids and 10% oil, as compared to 68% natural gas, 20% natural gas liquids and 12% oil during the first quarter of 2015 and 61% natural gas, 9% natural gas liquids and 29% oil during the second quarter of 2014.

Gulfport's second quarter of 2015 Utica Shale production was 457.6 MMcfe per day, or 97% of our aggregate net production, as compared to 93% and 79% of our aggregate production during the first quarter of 2015 and the second quarter of 2014, respectively. During the second quarter of 2015, in the Utica Shale Gulfport spud nine gross (6.7 net) wells and turned-to-sales 19 gross (14.5 net) wells, all located within the dry gas phase window of the play. As of June 30, 2015, Gulfport had approximately 137 gross (103.8 net) wells producing in the Utica Shale.

Gulfport's realized prices for the second quarter of 2015 were $1.99 per Mcf of natural gas, $0.30 per gallon of NGL and $47.40 per barrel of oil, resulting in a total equivalent price of $2.60 per Mcfe. Gulfport's realized prices for the second quarter of 2015 include an aggregate non-cash unrealized hedge loss of $34.6 million. Before the impact of derivatives, realized prices for the second quarter of 2015, including transportation costs, were $2.23 per Mcf of natural gas, $0.30 per gallon of NGL and $50.15 per barrel of oil, for a total equivalent price of $2.84 per Mcfe.

Commenting on the results, Benjamin Hulburt, Chairman, President and CEO said, “We believe we had another outstanding quarter operationally. I remain very impressed with our team’s ability to once again beat production estimates, while driving drilling and completion efficiency gains. As we continue to move forward and build on this operational momentum, we have raised our full-year 2015 guidance to reflect the production growth we strongly believe we can achieve. During the quarter, we completed both our Sawyers pad and Weekender pad. The Sawyers pad includes 3 gross (3.0 net) wells, which were drilled on 715 foot inter-lateral spacing and represent our first Dry Gas spacing test. These wells were turned-to-sales at the end of the second quarter at our target start rate of approximately 2.3 Mcf per day per foot of lateral with average initial flowing pressures of 6,000 psi. While it will take time to assess the viability of this spacing test, we have commenced our testing activities and are highly focused on the performance of these wells. The Weekender pad includes 4 gross (2.9 net) wells that were drilled in 2014. These wells were completed at the end of the second quarter and will be turned-to-sales during the third quarter of 2015. With the completion of these wells, we now have 21 gross (16.8 net) wells remaining that have been drilled, but are awaiting completion. Of those remaining wells, 15.2 net wells are in the Lean Condensate window. I am also very pleased that we are outperforming our production forecasts while maintaining our spending levels at our capital budget expectations.”

GreenHunter Resources, Inc. (NYSE MKT:GRH) (NYSE MKT:GRH.PC), a water disposal and total fluids management company operating in the Appalachian Basin, today announced production commencement late last week of the Harris C&W #1 (C&W) and McKelvey M #3 (McKelvey) SWD wells located at the Company’s Mills Hunter facility located in southeastern Ohio. The initial combined injection rate for the C&W and McKelvey wells is approximately 6,000 barrels per day, or approximately 3,000 barrels per day each. The increased injection capacity effectively raises GreenHunter’s overall disposal volumes from approximately 15,000 barrels per day to approximately 21,000 barrels per day, an increase of approximately 40 percent.

Kirk Trosclair, Executive Vice President and Chief Operating Officer said, “After a prolonged delay, we are finally able to report that two new disposal wells are online and operating near full capacity at our largest SWD facility. These wells are the third and fourth wells to be placed in service at the Mills Hunter facility. Two additional wells are in the final approval stage with certain State authorities. While demand for our water disposal services remains strong even during the downturn being experienced today in the energy industry, the regulatory process for adding injection wells to our portfolio has changed over the last year. The entire process from start to finish is taking much longer than initially anticipated. The review and approval process, which previously took around thirty to forty-five days is now taking more than ninety days.”

GreenHunter is not shy about complaining that the ODNR is slow in approving the two additional injection wells at the Mills Hunter site, just as representatives clearly stated in the past their dissatisfaction with the Coast Guard's handling of a request to move drilling waste via barges on the Ohio River.

For the past five years EID has been following the anti-fracking campaigns of the Community Environmental Legal Defense Fund (CELDF), a Pennsylvania-based environmental activist group. Although CELDF has claimed that it’s not opposed to fracking, this claim does not withstand scrutiny. In fact, CELDF’s mission is actually far broader than just banning fracking, as its website describes:

“The Legal Defense Fund has now become the principal advisor to activists, community groups, and municipal governments struggling to transition from merely regulatingcorporate harms to stopping those harms by asserting local, democratic control directly over corporations.” (emphasis added)

The public may not be familiar with CELDF itself, but its campaigns have become quite noticeable. More specifically, CELDF has been lobbying Ohio localities to adopt what it has termed “Community Bill of Rights Fracking Ban,” “Anti-Fracking Bill of Rights” and “Charter amendments or home rule to ban fracking.” It is by design that the CELDF remains behind the scenes, since its campaign is built on the illusion that individual communities are rising up.

Ironically, U.S. shale development has been a gift to CELDF, as it has been able to use “fracking” as a means to an end, using opposition to fracking as a way to attack business and indeed economic development in its entirety. The end goal? Stripping individual rights in favor of providing legal rights to “nature and ecosystems,” all through a bizarre and contradictory campaign platform of “self-government.”

Introduction to CELDF

CELDF Founder, Thomas Linzey

After an internship with the U.S. Environmental Protection Agency, Thomas Linzey graduated law school and founded CELDF in 1995, motivated by his opposition of the National Environmental Policy Act (NEPA) of 1969, which as he says, “gives people the illusion that something is being done to protect the environment.” The stated purpose of NEPA is:

“To declare a national policy which will encourage productive and enjoyable harmony between man and his environment; to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man; to enrich the understanding of the ecological systems and natural resources important to the Nation; and to establish a Council on Environmental Quality.”

This is important because it sets the stage for the entire premise of Linzey’s and CELDF’s ongoing efforts. In 1995, long before the first lease for unconventional drilling took place in Ohio, Linzey and the CELDF had already started work on its radical “rights of nature” agenda. A look at the CELDF mission statement sheds more light on these goals:

“Building sustainable communities by assisting people to assert their right to local self-government and the rights of nature.” (emphasis added)

Building on this mission, Linzey published a book entitled Be the Change: How to Get What You Want in Your Community, a mantra for teaching communities how to ignore laws, going so far as to claim a need for “rewriting” the U.S. Constitution.

Here is an excerpt from Linzey’s book:

“You may be surprised to learn that most of the people who appear in the pages ahead don’t know each other. That will be changing in the years to come, as community leaders across the country join hands to begin a journey that will end with new local and state constitutions, and perhaps even the rewriting of the United States Constitution. These people are convinced-from the things they’ve seen, heard, and experienced – that nothing short of a complete overhaul will solve the problems they face in their communities.” (emphasis added)

“If you live in a corporate state, there is in only one option left to you, which is to dismantle it, and build something new. This movement is a reboot of American democracy.”(emphasis added)

In 2009, Linzey worked on a project in Spokane, Wash., on a so-called “Community Bill of Rights,” which attempted to create legally enforceable rights for the Spokane River. The ballot measure in Spokane has failed twice. In an interview, Linzey states proudly that CELDF, through its Community Bill of Rights campaign, has taken steps to override certain constitutional rights.

“Well it’s this concept that we have never really had an environmental movement in the United States, because our environmental movement has always been based on nature as property. In other words, if you own 10 acres of ground in the United States carries with it the legal ability to destroy the ecosystems on that 10 acre piece of property. What is increasing growing is a realization that for a real environmental movement to occur,ecosystems must have legally enforceable rights of their own.” (emphasis added)

In 2015, Linzey addressed the Earth at Risk audience, where he discussed his organization’s platform when folks approach them on oil and gas development. Linzey appeared to say that “it’s time” to start taking people’s private property:

“If you are going to put all that work into a ballot initiative, why not do a ballot initiative that bans all finance companies in New York City from funding new projects that exasperate climate change? Why not do something real…why not do something real…cause people are saying to themselves, ‘it would be illegal, it would be unlawful, it would be unconstitutional, because you are taking their property’ well..(expletive), it’s time.”

CELDF National Organizer, Ben Price

Nine years after CELDF’s launch, Thomas Linzey is now joined by Ben Price, the national organizer and spokesman for CELDF, who has been tasked with drafting local ordinances.

Tuesday, July 28, 2015

The latest weekly update on Utica shale permitting in Ohio has been made available by the Ohio Department of Natural Resources. It was another relatively slow week.

Five new permits were issued. Monroe County was the hot spot, with four of those five permits going to Gulfport Energy for wells there. The only other permit was issued to Chesapeake Energy for its Ellie 19-14-6 1H well in Carroll County's Orange Township.

The five new permits last week push the cumulative total to 1,980, with 1,543 wells drilled and 926 producing. The Utica rig count held at 20.

Monday, July 27, 2015

Fulton County Expositor: Court: NEXUS Can Conduct Surveys - "Fifteen Fulton County residents who adamantly refused NEXUS surveyors access to their property have been ordered by Common Pleas Court Judge James E. Barber to step aside and let the work be completed. However, the time to complete..."

Marcellus.com: Oil, Gas Industry Will Bounce Back From Low Prices - "The oil and gas industry eventually will bounce back from low energy prices, an Ohio Oil and Gas Association spokesman says. Mike Chadsey, the association’s director of public relations, provided an update on the overall industry Thursday to the Youngstown/Warren Regional Chamber at..."

NGI: Weatherford Cuts 1,000 More, Mostly in U.S., Following Crushing Quarter - "Weatherford International plc is laying off another 1,000 people, mostly U.S. support staff, to deal with an energy industry that is "substantially underfunded and substantially underinvested," CEO Bernard J. Duroc-Danner said Thursday. The fourth-largest global oilfield services operator had..."

NGI: Encana Incurs $1B-Plus Consecutive Impairment, Lays Off 200 - "Encana Corp. was stung for the second quarter in a row by impairment charges of more than $1 billion, as liquids production grew, natural gas output sank and commodity prices tanked. More than 200 people have been laid off since the start of..."

Energy in Depth: New Methane Study Finds Low Emissions from Transmission and Storage Facilities - "Researchers at Colorado State University, partnering with the Environmental Defense Fund (EDF), released a new study today focusing on methane emissions from natural gas transmission and storage facilities. The study finds very low methane emissions that are very much in line with the Environmental Protection Agency’s (EPA) estimates in its..."

The Intelligencer/Wheeling News-Register: Lots of Gas May Stay in Ground - "The Utica Shale formation may hold 782 trillion cubic feet of natural gas, but officials said that does not necessarily mean it will make economic sense to extract such an amount when the selling price is down by more than $1 per unit compared to..."

Pittsburgh Business Times: Rex Energy Sees Sharp Decline on Nasdaq - "Rex Energy Corp. shares dropped 14 percent by midafternoon Wednesday after an analyst downgraded the stock. Rex fell 48 cents, or 14.68 percent, to $2.79 a share by 2 p.m. It was near its 52-week low of $2.47 but had..."

Washington Times: Nonsensical 'Fractivist' Pipeline Hysteria - "The anti-fracking movement has moved beyond the realm of the petty and unseemly into the ridiculous. Led by Yoko Ono, the avant-garde artist and widow of musician John Lennon, fracktivists are trying to stop construction of pipelines that would..."

Forbes: Natural Gas Dominates Under EPA's "Clean Power Plan" - "The first “must know” about EPA’s “Clean Power Plan” (CPP) is that electricity is good and enables the basic services for human existence. We want to encourage, not discourage, the use of electricity. Electricity is a particularly high form of energy and..."

Gas & Oil: Wonder How the Utica Shale Play Got Its Name? - "The Utica Shale is a stratigraphical unit of Middle Ordovician age in the Appalachian Basin. It underlies much of the northeastern United States and adjacent parts of Canada. (First of all, stratigraphical: From the word stratigraphic, which means a branch of geology that studies rock layers (strata) and layering..."

Moving on to our dry gas Utica well. Last week we successfully completed the fracking of this well. The frac was an 18 stage job in a 3,221 foot lateral that utilized ceramic proppant. We were able to successfully place 100% of the planned proppant while maintaining our desired pumping rates.

Last night we concluded a 24 hour deliverability test to sales of this well. During this test, the well averaged 72.9 million cubic feet per day with an average flowing casing pressure of 8,641 psi. This equates to a 24 hour IP per 1,000 foot of lateral of 22.6 million cubic feet per day. To the best of our knowledge, this is the highest reported IP of any Utica well to-date and the per-foot rate is more than double the previous high. As you might expect, we're very pleased with the results of this well.

I want to make note of the fact that we were able to flow this well directly into the sales pipeline without shutting in production from our other wells. This was possible primarily because of the integrated nature of our Upstream and Midstream businesses.

Our Midstream group was able to reconfigure the gathering system to allow this capacity to be available, which likely would not have been possible on a third-party system. Our current plan is to produce this well to choke controlled rate of approximately 24 million cubic feet per day to manage the stress on the proppant and to monitor the pressure decline so we can begin to get an understanding of the decline profile and EUR potential of this well.

Currently the well is producing 26 million cubic feet per day and approximately 2,000 barrels of frac water per day with flowing casing pressure of 9,555 psi. In fact, the flowing pressure is currently climbing as the well continues to clean up.

First was the shale oil and gas boom. Eastern and southeastern Ohio saw a surge in lease activity, pipeline projects and hiring. New wealth trickled through the economy to car dealers, hotel operators and restaurants.

And then, late last year, the price of crude oil plummeted.

Now, Ohio’s shale country is an uncomfortable place, with elements of the boom still in place, and some companies facing what can only be described as a bust.

“To me there’s a very clear picture,” says David Hill, an independent oil and gas producer in Guernsey County, and president of the Ohio Oil and Gas Association. “If you’re in the oil and gas business right now, you’re very, very concerned about your future.”

He is referring to a slice of the oil and gas business, the one that explores, drills and produces energy. One of his key indicators is the number of active drilling rigs, which was 23 at the end of May, down from 38 a year ago, according to Baker Hughes, an oilfield services company.

Last year the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, initiated an economic oil war against the United States when it refused to cut production in November of 2014 like it usually does when oil prices drop. This was an attempt to drive some U.S. shale oil producers bankrupt and stem the flow of North American shale oil onto the global market.

In fact, OPEC actually increased oil production in November, which drove oil prices down to nearly $50/bbl, the price at which many shale producers can’t even break-even. But it hasn’t quite worked out the way they wanted.

In fact, I think they’ve lost this war by inadvertently making the U.S. shale oil industry leaner and meaner.

“The deliverability of Middle East oil is just not there in the long-term,” says David Zusman, Managing Partner of Talara Capital Management, with whom a long discussion generated a clearer picture of what is coming for the future of oil. “The EIA has global oil demand in 2020 and beyond being met with increased supplies from a region of the world stuck in a multi-decade crisis that is likely to get much worse before it ever gets better. Supply from the short-cycle U.S. oil market is required to balance the global crude market at a rate where U.S. shale should remain a growth industry.”

Friday, July 24, 2015

U.S. Sen. Sherrod Brown on Wednesday called for doing more to get rid of older railcars transporting hazardous materials to better protect Ohio communities.

“We’ve seen too many derailments of trains with unsafe cars, often carrying crude oil and other hazardous material. It’s time to put a stop to these dangerous and costly spills,” Brown said in a teleconference.

“That’s why I introduced legislation that would help reduce risks to communities near railroad tracks by phasing-out older tank cars, providing a tax credit to help companies upgrade to newer, safer cars and help communities better prepare for accidents,” he said.

Up to 50 trains per week carrying volatile crude oil from North Dakota’s Bakken Shale pass through Ohio on their way to East Coast refineries.

The U.S. Department of Transportation estimates that trains carrying crude oil or ethanol will derail an average of 10 times per year for the next 20 years, causing as much as $4 billion in property damage.

The danger of transporting crude oil by train is certainly a very legitimate concern. Of course, the upgrades Brown is calling for have a cost, and the article goes on to note that the funding would come from a $175-per-shipment fee on older tank cars.

Experts have assumed that the drop in emissions reflected a shift toward natural gas, which produces roughly half as much carbon dioxide per unit of energy as coal and was made cheap by the hydraulic fracturing boom.

Instead, most of the credit should be given to changing consumer demand and slumping industrial output during the period, according to findings published in the journal Nature Communications. The results are based on economic analysis of energy use, manufacturing, emissions and consumer demand between 1997 and 2013.

"In our results, natural gas plays a bit part in decreasing emissions," said Steven Davis, assistant professor of Earth system science at UCI and a co-author of the study. "The real heroes are consuming less stuff and using energy more efficiently."

Between 2007 and 2009, when U.S. emissions plummeted by 10 percent, there were changes in how much Americans consumed, what types of products they consumed, the balance of manufacturing and service industries, and the quantity of energy used per dollar of products produced.

Together, these changes account for more than three-quarters of the decrease in emissions between 1997 and 2013, with changes in the mix of fuels used to generate energy accounting for just 18 percent, Davis said.

When I saw this story, I had a theory for what the reaction to the study would be. I figured that anti-fracking activists wil point to these results as further proof that natural gas is bad for the environment, and in doing so would not mention that even this report still acknowledges that changes in fuels for energy generation did account for 18 percent of the emissions reductions. That seems to be exactly what has happened, if this article from the staunchly anti-drilling Salon is any indication.

Meanwhile, I figured that Energy in Depth would weigh in swiftly, likely finding several points to argue against the results of the study, including an anti-fossil fuel agenda on the part of the researchers. And sure enough, click here to read Energy in Depth's response to the study.